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INVESTOR TYPES AND RISK TOLERANCE

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At Verezya, we understand that every investor has unique financial goals, risk preferences, and investment horizons. To help our subscribers align their investments with their risk tolerance, we have categorized investors into five distinct types based on their risk appetite. This classification will enable you to understand which investment strategies and allocation models are most suitable for your individual needs.

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1. Ultra-Conservative Investors:

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  •    Risk Tolerance: ≤5% of capital

  •    Characteristics: Prioritize capital preservation, low tolerance for risk, prefer stable and predictable returns

  •    Investment Goals: Maintain principal value, generate steady and reliable income

  •    Suitable Verezya Strategies: Low-volatility, income-generating instruments (high-quality fixed-income securities, dividend-paying stocks)

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2. Conservative Investors:

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  •    Risk Tolerance: ≤15% of capital

  •    Characteristics: Prioritize capital preservation and stability, slightly higher risk tolerance than ultra-conservative investors

  •    Investment Goals: Generate steady returns above inflation, maintain low risk profile, avoid significant losses

  •    Suitable Verezya Strategies: Balance of income generation and moderate capital appreciation (investment-grade fixed-income securities, high-quality equities, low-correlation alternative investments)

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3. Moderate Investors:

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  •    Risk Tolerance: 15%-30% of capital

  •    Characteristics: Comfortable with balanced risk and return, accept short-term volatility for higher long-term returns

  •    Investment Goals: Achieve a combination of capital appreciation and income generation, tolerate moderate portfolio fluctuations

  •    Suitable Verezya Strategies: Blend of growth-oriented investments and income-generating assets (diversified equities, fixed-income securities with varying credit qualities and durations, diversifying alternative investments)

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4. High Risk Appetite Investors:

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  •    Risk Tolerance: 30%-50% of capital

  •    Characteristics: Willing to accept significant short-term volatility and potential substantial losses for higher long-term returns

  •    Investment Goals: Prioritize aggressive capital appreciation, comfortable with high uncertainty, long investment horizon

  •    Suitable Verezya Strategies: Focus on aggressive growth opportunities (concentrated positions in high-growth equities, leveraged instruments, speculative investments in emerging markets or nascent technologies)

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5. Very High Risk Appetite Investors:

 

 

  •    Risk Tolerance: >50% of capital

  •    Characteristics: Extremely high tolerance for risk, willing to allocate a significant portion of capital to high-risk investments

  •    Investment Goals: Maximize potential returns, comfortable with extreme volatility and the possibility of substantial losses

  •    Suitable Verezya Strategies: Highly aggressive and speculative investments (concentrated positions in high-risk assets, leveraged instruments, emerging markets, and nascent technologies)

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Example (for illustrative purposes only, not investment advice):

 

  • Assume an Investor A has $50,000 capital in their Interactive Brokers account and would like to subscribe to the Verezya Micro strategy, which has a 20% volatility provision based on a $100,000 model capital. As a moderate investor, they may take on risk ranging from 15% to 30% of their investment capacity.

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  • Assuming a 15% risk appetite, Investor A would be comfortable risking $7,500 (15% of $50,000). Given the strategy's 20% volatility provision, the suggested scale selection for Investor A would be 40% (2 times 20%), meaning they would allocate $20,000 (40% of their capital) to the Verezya Micro strategy.

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  • However, it is advisable for Investor A to start with a lower scale, such as 20%, allocating $10,000 (20% of their capital) to the strategy (taking risk of risking $3,750). As they become more comfortable with the strategy's performance and risk profile, they can gradually increase their scale percentage.

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  • If Investor A has a 30% risk appetite, they would be comfortable risking $15,000 (30% of $50,000). In this case, the suggested scale selection would be 80% (4 times 20%), meaning they would allocate $40,000 (80% of their capital) to the Verezya Micro strategy.

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  • However, it is crucial to consult with a Registered Investment Advisor (RIA) to ensure that the chosen allocation aligns with Investor A's specific financial situation and goals.

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Factors to Consider:


To determine your risk tolerance and suitable investment strategies, consider the following factors:

 

  • Capital Availability: Assess the amount of capital available for investment and determine the proportion you are comfortable allocating to various risk levels.

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  • Risk Tolerance: Evaluate your willingness to accept potential losses and short-term volatility in pursuit of higher returns.

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  • Investment Goals: Define your investment objectives, such as capital preservation, income generation, or aggressive growth.

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  • Investment Horizon: Consider the time frame over which you plan to invest and whether you can withstand short-term fluctuations.

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  • Strategy Selection: Carefully evaluate the investment strategies offered by Verezya and other providers to ensure they align with your risk tolerance, investment goals, and overall financial situation. Consider the underlying assets, investment methodology, historical performance, and associated fees.

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  • Choice of Brokerage: Assess the reputation, financial stability, regulatory compliance, user interface, trading tools, educational resources, range of investment products, and fee structure of the brokerage platform to ensure it aligns with your preferences and provides a cost-effective solution.

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Consulting with a Registered Investment Advisor (RIA):


While the information provided here can help you understand your risk tolerance and suitable investment strategies, it is essential to consult with a Registered Investment Advisor (RIA) in your domicile. An RIA can provide personalized financial advice tailored to your specific situation, taking into account your risk tolerance, investment goals, tax considerations, and overall financial planning needs. They can help you make informed decisions and ensure that your investment strategy aligns with your long-term financial objectives.

Remember, investing involves risk, and it is crucial to regularly reassess your risk tolerance and adjust your investments accordingly, as personal circumstances and market conditions may change over time. By working with a qualified RIA and leveraging the resources provided by Verezya, you can make well-informed investment decisions and work towards achieving your financial goals.

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